Project delays continue
No power yet, but Nova Scotians paying for subsea link
By now, Nova Scotians ought to be basking in the warm light generated from the Muskrat Falls hydroelectric project in Labrador.
The $1.7-billion cable stretching 170 kilometres across the bottom of the Cabot Strait to connect the Newfoundland and Labrador project to Point Aconi, N.S., has been in place for nearly three years and operational since January 2018. It was intended to bring hydroelectricity to Nova Scotia by a readjusted date of June 1 of this year.
That did not happen. Nalcor Energy, the company behind the project with costs estimated to balloon by more than 70 per cent to more than $13 billion by completion, said late last month that the project will be delayed by at least four months after a March clawback to care and a maintenance mode in response to the COVID-19 pandemic.
Work was to resume May 30 but the requirement to gradually and slowly get back up to speed would produce a longer delay in the project completion, Nalcor said.
“Any delay in the delivery of the Nova Scotia block of energy is to be characterized as detrimental,” said Halifax lawyer William Mahody, the consumer advocate who acts as an intervenor on behalf of ratepayers in Nova Scotia Power Maritime Link Inc. applications before its regulator, the Nova Scotia Utility and Review Board.
“The sooner the energy flows the better off we’ll be,” Mahody said.
“The unknown right now is when that energy is going to flow.”
In November 2019, the board approved a 2020 interim assessment of $144.5 million that can be collected by NSP Maritime Link, an Emera subsidiary, from Nova Scotia Power and its customers, the ratepayers, for costs related to construction of the Maritime Link.
The charge to NSP customers was $115 million in 2019 and $109 million in 2018.
The board directed in its 2019 decision that the $10 million a year it had ordered NSP to hold back from what it charges ratepayers in previous interim assessments be continued in 2020 and be prorated to the number of days prior to the start of the Nova Scotia block of electricity coming across the Cabot Strait.
In 2019, the hold-back meant NSP was to return $4,517,904 to ratepayers, the payback being equal to any shortfall of $10 million in benefits that the link had provided to ratepayers.
In 2018, NSP had to refund $8.4 million of the $10 million to ratepayers. The money doesn’t actually return to ratepayers’ pockets but is instead applied to the company’s fuel costs that top hundreds of millions a year.
“That same protection is in place this year,” Mahody said.
The link, even without flowing electricity from Newfoundland to Nova Scotia, still provides a minimal level of benefit to ratepayers because there is some electricity that is going in the opposite direction, from Nova Scotia to Newfoundland.
Mahody said there are operational efficiencies that Nova Scotia Power can achieve by flowing electricity across the link to Newfoundland. When transmission across the Canso Causeway was interrupted last year, NSP needed to dump some energy to retain its system reliability and it was able to do that by sending electricity across the link to Newfoundland, he said.
“Those benefits are all in order of magnitude smaller than the benefits that we are going to receive when the link energy is actually flowing,” he said.
November will mark another important date in the story. The federal government provided a loan guarantee for the link project that significantly reduces the cost of interest that ratepayers pay.
“One of the conditions of that central loan guarantee is that payments on the financing needed to start in 2020 and so what the (utility) board decision did was say we will delay this as long as we can, and it doesn’t get triggered until Nov. 1,” Mahody said.
“The start date is moving, which is concerning,” Mahody said.
“It is the case that whenever ratepayers are paying for something that you don’t see the benefit of, it raises a concern about the situation we are in. We are paying costs, we are not receiving the energy but it is still the case that there will be energy flowing and trying to match the payments with the flow of energy, I think it is fair to say, is proving to be more challenging than we thought it was when the purchase was approved.”
The unresolved issue that is holding up the Nova Scotia block of energy is that software needed to operate and control the transmission over the link, to be supplied by General Electric, is still being developed and tested. GE reportedly is running into major problems.
Nova Scotia Power is depending on link energy to provide about 10 per cent of the province’s total electricity requirements on average, said company spokeswoman Jacqueline Foster.
Under provincial legislation, starting in 2020, 40 per cent of the electricity NSP supplies to its customers is to come from renewable energy sources.
With the pandemic delaying the Muskrat Falls project, the province has modified that standard to require that the company’s renewable energy average hit 40 per cent over the 2020 to 2022 period.
“The averaging better aligns with many of our other compliance requirements which provide the opportunity to comply in the most cost effective way for our customers,” Foster said.
A graphic on the NSP website shows that the company is at only at 14 per cent for renewable energy sources on Monday, a percentage that more than doubles to 29 per cent for the year to date average. The 10 per cent boost from Muskrat Falls would push it close to the 40 per cent goal.
On Monday, the company was creating seven per cent of its energy from wind, two per cent from hydro and tidal, five per cent from biomass, 41 per cent from coal and petroleum coke, 25 per cent from natural gas and oil, and 19 per cent from imported fuel.
“The imported energy from Muskrat Falls is expected to primarily reduce solid fuel consumption (coal and coke), but at times it could replace other non-renewable areas such as gas or oil,” Foster said.
While the full impact of the delay on the Muskrat Falls project schedule remains unclear, Foster said NSP has been exploring options for additional renewable energy since the project was paused in March.